How to create and stick to your holiday budget

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Ask a Lender
November 30, 2017


Key Points

Keep your spending in check this holiday season

  1. Set intentions.
  2. Calculate disposable income.
  3. Size up your social groups.
  4. List all holiday expenses.
  5. Allocate your time and money.
  6. Know thy spending.
  7. Say no, if you want.

Do you associate the holidays with the chiming of cash registers over silver bells? Although generosity and entertainment are intrinsic to the holiday season, festivities don’t have to put you in the red. Enjoy a celebratory season without being haunted by the ghost of holiday spending future with these seven tips for creating and sticking to a holiday budget.

1. Set intentions

Personal budgets should be more than just an exercise in accounting. Rather than viewing the holidays as a series of gift-wrapping and socializing tasks to be performed, identify your intentions for the season — be it family celebrations, philanthropy or spiritual reflection — and let that be your guide for how you allocate money.

2. Calculate disposable income

Remember that holiday shopping is not permission to tap into your emergency fund or retirement accounts. The money should come from your disposable income alone — that is, your monthly income less essential expenses like rent or mortgage payments.

If this number looks leaner than you’d like, you may need to cut back on some of your routine luxuries. Alternatively, consider picking up extra hours at work if possible or take on seasonal employment at a retailer to pad your budget.

Debt is not disposable income. Using credit cards can be a tempting way to bridge the financial gap, but if you can’t pay off the balance by the end of the billing cycle, you accrue interest that only further strains your budget into the new year.

3. Size up your social groups

You and your family may associate with various social groups, such as family, friends and coworkers, as well as providers such as a family lawyer, mail carriers and children’s teacher.

Take stock of each group or individual and assess how you want to celebrate with or show gratitude to them. Do you need to have a big dinner party? Are gifts required for acquaintances? Explore alternative arrangements such as a two-gift minimum for immediate family, secret Santa exchanges with extended family, or simply forego gifts with friends altogether and opt for a potluck brunch instead.

Don’t be afraid to communicate your ideas with your social groups to manage expectations. They wouldn’t want you going into debt for what should be gestures of care and not obligation.

4. List all holiday expenses

Presents and parties are far from the only financial burden of the holidays. Every activity and purchase that you would not have in a typical month are seasonal expenses that should go in your holiday budget. They may include but are not limited to:

  • Flights and car rentals
  • Accommodations
  • Gas for long distance travel
  • Expenses for parties you host
  • Expenses for parties you attend
  • Expenses for office holiday parties
  • Charitable contributions
  • Family traditions or activities
  • Gifts and cards
  • Wrapping, packaging and shipping costs
  • Miscellaneous unexpected expenses

 5. Allocate your time and money

Having identified the total amount you can spend, who you will spend it on and how, allocate exactly how much money to put toward each activity and gift. Avoid the allure of lifestyle inflation and spend within your means.

Think about creative ways to reduce costs, such as thrifting home decorations, making DIY cards and giftwrap or buying refreshments in bulk so you always have a bottle to bring to a last-minute party. Small expenses like gift tags, singing holiday cards and stocking stuffers add up quickly, so putting a hard dollar amount on how much you are willing to spend can help keep you in check.

If philanthropy is an important part of your holidays, consider volunteering, donating gently used goods or giving blood as ways to provide for the needy without exceeding your financial means.

It’s important to stick to the numbers in your budget, but understand it also should be a living document. Plans will materialize and be canceled throughout the month, so recalculate where you can spend more or less as your schedule changes.

6. Know thy spending

Once you know what’s on your shopping list, don’t procrastinate. Some start shopping for next year during this year’s after-holiday sales. If Thanksgiving snuck up on you, and you suddenly realize Christmas is just around the corner, set aside a time each week to thoughtfully purchase a few items off your list to avoid a mad dash of hasty spending later in the month, and maybe catch a sale. Consider setting reminders to check your credit and bank balances.

Physical vs. digital

Make a list and stick to it, whether going online or to the store. Some can’t resist the upsell at the register, while others are lured into overspending by the ease of online shopping. Know your weaknesses and how best to stick to your budget.

Paper or plastic

Pay in cash or check, but make sure you can pay. Some stash their holiday cash into an envelope, and the shopping stops when the envelope is empty. Others prefer to use credit cards, particularly for cash back or airline miles rewards. Credit may also offer better protections in case of damage or theft. If you use plastic, keep track of your spending.

Coupons and deals

A quick search on third-party group deal and coupon code sites can yield significant savings. Many online retailers offer free shipping or percentage-off deals for first-time orders or those signing up for e-mail advertisements.

Track your spending

A budget is of no use unless you can track your progress and adhere to it. If you are planning your holiday budget with a partner, consider delegating tasks or putting your budget and shopping list in a synced app so you can check off items as you complete them and avoid overlap. As soon as you purchase an item, adjust your budget accordingly.

7. Say no, if you want

For the sake of not only your financial well-being but your mental health as well, remember that you have the option to turn down activities that you do not want to attend. It’s easy to get caught up in the excitement of the holiday season or feel obligated to attend certain functions, but graciously declining situations that don’t add value to your life — or that you simply cannot afford — is perfectly acceptable.

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